The future of crypto

The world of finance is vast and diverse. Throughout the years, several events have taken place for currencies to get to where it is today in society. Recently, in this massive field of finance, a new horizon has been added to its spectrum. It is a new and advanced financial concept called cryptocurrency (crypto). This innovative, fast-growing currency is the future of finance as it is entirely digital. As technology advances, the old financial system will become obsolete, and cryptocurrency will lead the financial world.

What is cryptocurrency?

A cryptocurrency is a form of encrypted binary data used to regulate the generation of currency units and verify the transfer of funds. It operates on a decentralized, peer-to-peer network and can be used to purchase goods and services. Any government or financial institution does not regulate cryptocurrencies, and their value is derived from the consensus of the participants in the network. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on flat exchanges, and their prices can fluctuate rapidly in response to news events or changes in the market. They are considered a high-risk investment but have become increasingly popular recently.

A brief history of cryptocurrency

The history of cryptocurrency is relatively short, as this is a fairly new concept in finance and trade. In 1983, David Chaum, an American cryptographer, devised an unspecified form of electronic currency called e-cash. He implemented this idea by the name of Digicash. This early form of electronic payment required users to use specific software to withdraw cash from the bank. Many electronic currencies, such as E-gold, Hashcash, and B-money, were created after this. None of these electronic currencies could succeed in their endeavors because they were centralized (Centralization in cryptocurrency exchange refers to making transactions with the help of a middleman or third party).

For this reason, they could be hacked or shut down at any given moment. However, these failed endeavors slowly paved the way for cryptocurrency to be developed in present times. In 2009, it is assumed that a pseudonymous developer or a group of developers named Satoshi Nakamoto developed the first decentralized form of cryptocurrency called "Bitcoin." Their new decentralized digital currency solved the double spending or hash spending problem. It is said that the most significant and first-ever real-world bitcoin transaction was made by a man named Laszlo Hanic. He bought two pizzas for the price of 10,000 Bitcoins (which back then was not worth that much but now, it is worth approximately 626 million USD). This transaction may seem silly to us. However, because of this first-ever transaction, the world of cryptocurrency and Bitcoin is at its present state. If this transaction were not made, Bitcoin would not even reach the value of 1 USD. Following the advancement of Bitcoin, numerous cryptocurrencies such as Ethereum, Binance, Tether, Solana, and many others (approximately 4000) have been developed, which is causing the expansion of this field at a rapid pace.

How cryptocurrency works

Cryptocurrency is a digital or virtual currency that uses cryptography for security. Cryptocurrencies are built on a technology called blockchain, which is a digital ledger that records all transactions. Each cryptocurrency has a unique ID or "address" to send and receive funds. Cryptography verifies transactions, and each transaction is added to the blockchain. Whenever a transaction is made, a new block is added on top of the previous block in the history. Each block contains a few transaction data of who paid and how much, a new unique ID, and the ID of the previous block in the sequence. The benefit of this is that if someone tampers with an ID of a block, then the ID written in the previous block will no longer match, and every previous transaction block history will be invalid. So if someone were to create a transaction fraudulently, they would have to manipulate the copies of blockchain ledgers that half a million users worldwide have stored on a million different computers, which is near impossible. Whereas hacking into someone's bank account and making transactions to the hacker's account is possible.

This makes it difficult to hack cryptocurrencies, as each transaction can be traced back to a specific user. When someone wants to buy cryptocurrency, they need to set up a "wallet" with a unique address. They can then use their bank account or credit card to buy Bitcoin or other types of cryptocurrency on an exchange. The cryptocurrency is then sent to their wallet address.

The creation of cryptocurrency

The creation of crypto units is done by a process called mining. Mining is a process in which massive amounts of robust computer hardware are paired with resilient and adaptive software to "mine" crypto units. Crypto miners do this process. When a cryptocurrency is created, each crypto unit is encrypted by a unique sort of algorithm. The miners use their machines to solve these encryptions in a lengthy process. After successfully decrypting an algorithm, they are rewarded with crypto units as compensation. The more hardware a miner has, the greater the chances there are for the miner to create a crypto unit. Although, it should be noted that a limited number of units are made for each cryptocurrency. For example, the total number of Bitcoins is capped at 21 million, and as of today, approximately 18 million Bitcoins have been mined. This number increases every 10 minutes when a new unit is mined globally.

Should we invest in cryptocurrency? 

Cryptocurrency has been making headlines lately, and it is no wonder why. These digital assets are often volatile, which can make for a roller coaster ride for investors. However, despite the potential for value to rise and fall sharply, many people are still eager to get in on the action.

Cryptocurrency investment can be made in two ways - either as an optimistic gamble or a strategic investment. It is entirely up to the person on how they wish to go forward with their investments. As the crypto market is very volatile, deciding which investments would be the best is tough. The value or rate of cryptos works similarly to stocks. If people see potential in a particular currency, they will invest in it, and the value of that crypto will rise. However, if the rising value fails to skyrocket, then it is most likely for the owners to sell that crypto. So, mainly it all comes down to making the correct calls when investing in crypto, depending on the inclusive situation.

Cryptocurrency is an exciting investment because it is still a relatively new asset class. That means there is a lot of growth potential but also many risks. Only time will tell whether cryptocurrency is here to stay or if it is just a fad. In the meantime, those willing to take a chance may find that investing in cryptocurrency can be a profitable endeavor.

The impact of cryptocurrency

Everything around us has a bright side as well as a dark side. For crypto, the bright side of this fast-growing concept is that its field and value rates are rapidly increasing, the transaction process is extremely rapid, and there is no third-party involvement. As a currency, crypto transactions are very secure. Many have this misconception that crypto is entirely anonymous, but in reality, it is pseudonymous. The owner's info is indeed hidden.

Nevertheless, for every transaction made, the user has a public key or ID baked onto the blockchain ledger, which can be easily traced back. At the same time, the case for cash is that it is untraceable, which makes it much more suitable for criminal activity. Now, the less attractive side of crypto is the volatility rates, its acceptance in global finance, and the negative environmental impact. Firstly, the crypto prices are pretty speculative as crypto is a flat currency, its value increases and decreases depending on the public conception. The prices skyrocket if a glowing article or report comes out about it. However, if an influential person talks about them poorly, prices drop. Secondly, crypto still is not accepted as a form of payment in most places, and in many countries, it is banned as they deem it suspicious. Lastly, the negative environmental impact of crypto is expected to increase as it progresses. Mining is mainly responsible for this as it uses a massive amount of hardware, contributing a hefty percentage of the global carbon dioxide emission. This hardware also uses a lot of electricity in this process. Despite both positive and negative issues, it is proliferating and is soon expected to partake in global financial markets.

Cryptocurrency: The future of currency

It is without a doubt that cryptocurrency is far more advanced than the current centralized financial system. Although crypto has many flaws and drawbacks, it is still evolving and advancing daily into a completely flawless system. In this modern world of constant technological advancement, crypto, without a doubt, has a secure place as human beings always look for an easy and smooth system. The opposing sides of crypto are evident, but these problems are only temporary as crypto innovators are already on the path to solving them. Hence, it is safe to say that the future of currency lies in cryptocurrency.